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When looking for a home or investment property loan, which option should you choose: a bank or a broker?
Choosing where to get funding for your dream home is often a battle between two options: banks or brokers. While the goal is essentially the same, how and who you choose to apply for your mortgage or loan can impact the final rates, speed, and benefits you receive. Let’s get into the key differences between banks and brokers to know which is best for you.
Banks are traditional financial institutions with physical branches that offer a limited selection of options with their own lending criteria and (typically high) interest rates. Every day, they have a long line of applicants, allowing them to be more meticulous and picky about whose loan application they will approve. It all depends on whether a borrower fits their portfolio profile. If you align with the bank’s preferences (including a good credit score), the process can be smoother, leveraging your existing banking relationship and readily available financial information.
However, the downside of this convenience is the lack of flexibility. Banks may have stringent requirements, such as a minimum number of years of employment of a particular income threshold. Additionally, their processes can be slower due to the high volume of applicants and reliance on third-party processing, leading to potentially delayed responses and extended approval timelines.
Brokers, on the other hand, can offer you unlimited mortgage options from multiple lenders. They give borrowers more flexibility and tailored solutions. Unlike banks, brokers may have fewer people interested in them because they’re not lining up for business. They are not limited to a specific set of products or criteria, enabling them to explore a multitude of lenders to find the best fit for each client.
Brokers have access to numerous investors and lenders and can accommodate a broader range of financial situations, making them excellent choices for people with unconventional employment histories and unique financial profiles that may not meet a bank’s strict requirements. Moreover, brokers often have quicker turnaround times thanks to their direct access to decision-makers.
How do you know whether you’re working with a bank or a broker? The answer to this is, fortunately, pretty straightforward. Banks typically advertise their services online or through their physical branches, while brokers may require a bit more inquiry.
But the best thing to do is to simply ask: “Are you a bank or a broker?” You can even ask about the range of lenders they work with to know their breadth of options. A reputable broker will be willing to disclose their affiliations and be transparent about their lenders.
By understanding the difference between banks and mortgage brokers, you can make an informed decision and find the right partner to navigate your home loan journey. If you have any questions, feel free to reach out by phone or email. We’ll assist you as you go through the process of getting your dream home.
